Berkshire Hathaway Sued Over Retirement Plan Design Changes

Two present employees and one former employee filed the suit
in the U.S. District Court for the Northern District of Texas
challenging the firms’
decision to freeze accruals to Acme’s defined benefit plan and reduce
the company matching contribution rate in its 401(k) plan. The
plaintiffs contend that the acquisition agreement by
which Berkshire Hathaway acquired Acme approximately 14 years ago
requires Acme
to permit participants to accrue additional defined benefits
indefinitely, at the
same rate that benefits were being accrued at the time of the
acquisition, and
to make additional 401(k) matches forever, at the same rate as the
matches at
the time of the acquisition.

The complaint seeks restitution for participants because “Berkshire
Hathaway’s agreement is either an amendment to the retirement plans, in which
case the employees are entitled under [the Employee Retirement Income Security
Act] to the enforcement of the retirement plans in accordance with their terms,
or, in the alternative, it is a contract for the benefit of the employees, and
its breach entitles the employees to damages.”

In a press release related to the suit, Berkshire Hathaway says it “strongly
believes this interpretation of the acquisition agreement is clearly wrong and
expects that its actions will be upheld by the courts.” The press release
quotes an extended section of the acquisition agreement at issue in the suit:

“For purposes of all employee benefit plans (as defined in
Section 3(3) of ERISA) and other employment agreements, arrangements and
policies of Parent under which an employee’s benefit depends, in whole or in
part, on length of service, credit will be given to current employees of the
Company for service with the Company prior to the Effective Time, provided that
such crediting of service does not result in duplication of benefits. Parent
shall, and shall cause the Company to, honor in accordance with their terms all
employee benefit plans (as defined in Section 3(3) of ERISA) and other
employment, consulting, benefit, compensation or severance agreements,
arrangements and policies of the Company (collectively, the “Company Plans”); provided,
however, that Parent or the Company may amend, modify or terminate any
individual Company Plans in accordance with the terms of such Plans and
applicable law (including obtaining the consent of the other parties to and
beneficiaries of such Company Plans to the extent required thereunder); provided,
further, that notwithstanding the foregoing proviso, Parent will not cause the
Company to (i) reduce any benefits to employees pursuant to such Plans for a
period of 12 months following the Effective Time, (ii) reduce any benefit
accruals to employees pursuant to any such Plans that are defined benefit
pension plans, or (iii) reduce the employer contribution pursuant to any such
Plans that are defined contribution pension plans.

“The
Company shall amend its Supplemental Executive Retirement Plans to provide
that, effective as of the Closing, participants who have been ( or would have
been) employed by the Company for 10 years or more as of the later of the
Closing Date of December 31, 2000, shall be entitled to benefits under such
plan upon termination of employment, if terminated within 12 months after the
Effective Time, as if such participant was 55 years old at the date of such
termination, subject to the other provisions of such plan.”